How to Open a Trading Account

Due to the advancements in technology, online stock trading is now available to anyone with a computer and an internet connection. There are many different types of trading, and many online brokers to choose from. Depending on your trading style, you want to select the best online stock trading platform to match your style of trading. Once you've decided on an online broker, setting up an account is a simple process.

When opening an account, you have the option of cash accounts, or cash and margin accounts. Cash accounts do not give you buying power over the amount of money you have in your account, and you are limited to long transactions only. In order to sell stocks short you are required to have a margin account. During the application process, you must specify which type of account you want.

Once you have set up an account with the online broker of your choice, you need to fund it. Most brokers have a minimum amount to start which can be anywhere from $1000 to $10,000. Keep in mind that if you are wanting to day trade online, you are required to have a minimum of $25,000 in your account at the end of each trading session. If you fall below this amount, you will be restricted from day trading.

When you open a margin account, you will be given a buying power. This amount is 2x what is in your account. For example, if you have a $10,000 account, then you will receive $20,000 in buying power to stock trade with. If you have a minimum of $25,000 in your account you can be classified as a patterned day trader. This will give you 4 times buying power.

If you are not labeled as a patterned day trader, you are limited to less than 4 trades in a rolling 5 day period. If you exceed this amount you will receive a warning. If you exceed this a second time, your account will be frozen for 90 days. You will only be able to close existing positions.

The last step is downloading your stock trading software and begin to learn the ins and outs of it. I would recommend trading on a virtual account first. You want to make sure you have the process of buying stocks and selling stocks down before you venture into live online stock trading. Many of the online brokerages have these virtual accounts. They also usually have an extensive library of video tutorials specific to their stock trading platform.

Online stock trading can be a very rewarding career opportunity. It takes hard work, study time, and dedication to be a successful trader. Once you are there though, there is nothing like it. You are your own boss, work you own schedule, and have freedom to do what you want and when you want. As mentioned earlier, all you need is a computer and an internet connection. This allows you to trade from home or almost anywhere in the world.

TradeStocksAmerica Staff

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